Previous analysis of molecular chimeras between the mouse mammary tumor virus (MMTV) long terminal repeat (LTR) and the v-ras transformation gene from Harvey murine sarcoma virus (HaMuSV), and between the LTR and the chloramphenicol acetyl transferase (CAT) gene localized the steroid hormone regulatory sequences between 100 and 200 nucleotides upstream from the cap site in the LTR. Utilization of a competition assay with specific MMTV-LTR fragments and total cellular DNA immobilized on cellulose has shown the preferential binding of the glucocorticoid receptor to fragments of LTR DNA containing the sequences identified in gene transfer experiments as important for hormone regulation. The addition of transcriptional activator sequences to the MMTV promoter indicates that the hormone regulatory sequence is capable of regulating the activity of the exogenous enhancer. These observations suggest a model for the mechanism of hormone action in which the regulatory sequence acts as a modulator of another cis-dominant positive element. The role of chromatin organization in hormone action has been addressed utilizing chimeras between the MMTV-LTR and the bovine papilloma virus (BPV) 69% transforming fragment. These chimeras replicate uniquely as episomal elements in murine fibroblasts and maintain stable high-copy extrachromosomal copy numbers. It was found that nucleosomes are non-randomly organized on the sequences immediately upstream from the MMTV cap site, and that this phased structure is independent of hormone induction. A DNase I hypersensitive site is introduced into the chromatin structure upon hormone induction; the location of this site correlates precisely with the sequences required for transfer of hormone regulation in the biological assay. An S1-nuclease hypersensitive site also appears in the chromatin in a hormone-dependent manner. This site maps to the right side of the DNase I site. Thus, a highly organized nucleoprotein structure serves as a template for hormone regulation in vivo. The specific changes induced in this structure upon hormone stimulation suggest that alteration of the chromatin template by interaction with the steroid receptor may play a critical role in the mechanisms of hormone action.